The Business of Fantasy Hockey Part I – Value Investing

Jeff Angus

2010-07-21

Invest

I'd like to formally welcome Mike Colligan (my co-author for this article series) to DobberHockey. You can read more about Mike at the bottom of the page. For the past month we have been trading e-mails back and forth about fantasy hockey strategies for trading and player valuation, and how these strategies directly relate to many key concepts in the business world. We both possess business backgrounds from an education standpoint, and I was interested to see that Mike was using many of the same ideas and strategies from and applying them to fantasy hockey as I was. Today we will introduce the topic of value investing to you.

 

When we say fantasy hockey is business, we don’t mean you can make a living off your championship prize money (unless you are playing in a few high-roller leagues).  What we mean is that many of the same principles that define and drive today’s business world are the same principles that govern your fantasy hockey league – you just may not realize it. If you can understand where these ideas come into play and how they impact not only your team but also the competition, you’ll be able to use it to your advantage for years to come (assuming your entire league isn't reading this article).

If you’re looking for some light summer reading, this probably isn’t it. We’ll try to define and explain the topics and theory in enough detail to not overwhelm the novice, or bore the stock market guru. Comments, feedback, and thoughts are encouraged more than ever as we all can learn from each other's fantasy hockey experiences.

Today's Topic: Value Investing


Wikipedia defines value investing as "the buying of securities whose shares appear underpriced by some form of fundamental analysis. In fantasy hockey terms, that sentence can be worded as "the trading for or drafting of players whose value appears undervalued by some form of fundamental analysis or research."

Prior to a fantasy hockey draft, most of us take the time to review the players available and develop a strategy that we feel gives us the best chance to win. Are you the type that likes to draft the high-risk goalies, knowing that if you fail see immediate results you won’t hesitate to hit the waiver wire for a replacement?  Or do you focus on the safe, veteran players like Detroit's Brian Rafalski, who is a pretty safe bet to put up 10 goals and 40 assists each year?

Different investors often approach the stock market in the same way. There are a number of strategies that can influence which companies you buy stock in and when you buy it. Some day-traders are extremely active, always looking for the ‘stock du jour’. In fantasy hockey, these are the poolies who overpay for the quick starters, like Filip Kuba and Matt Carle.

Value investing is a more patient and calculated approach. Poolies who can’t keep their emotions in check may have trouble a